Copyright 1989 The New York Times Company
The New York Times

July 30, 1989, Sunday, Late Edition - Final

SECTION: Section 3; Page 2, Column 3; Financial Desk

LENGTH: 798 words

Fostering America's Interests Abroad . . . But It Lends to Oppressive Regimes

BYLINE: By JAMES BOVARD; James Bovard is an adjunct analyst for the
Competitive Enterprise Institute in Washington, D.C., and author of ''The Farm

Barber Conable, the former New York Congressman, took over the World Bank in
l986 promising to reorganize and redirect it. But, after three years, little has
changed and the bank, the largest multilateral institution in the world,
continues financing regimes that oppress people and mangle economies.
The New York Times, July 30, 1989

Last September, Congress approved a 4 billion pledge of callable capital to
allow the bank to borrow more money and rapidly increase its lending. Mr.
Conable boasts that the bank committed over $20 billion to the third world and
East Europe in l988, and World Bank officials have already spoken of lending up
to $24 billion in l989.

Unfortunately, the bank is setting new lending records by providing more and
more capital to less and less creditworthy regimes. Eight nations have ceased
repaying World Bank loans, and the bank has set up a special program to give new
money to governments to repay their old loans.

South Korea continues to receive extensive World Bank aid, even though it is
a major industrial power with a huge manufacturing trade surplus. Yet when Mr.
Conable was lobbying for this year's $14 billion American pledge, he denied that
South Korea was receiving any subsidy from the World Bank, because the interest
rate charged on the Koreans' loan was a shade above the bank's borrowing rate.
But all World Bank loans are effectively subsidized by being underwritten by the
United States and other Western governments, and Korea has received loans at
below-market interest rates from the bank.

Mr. Conable also misrepresented the nature of the World Bank's efforts in
Ethiopia. The Ethiopian Government is brutalizing its own people and doing its
The New York Times, July 30, 1989

best to make Idi Amin look like a moderate. The Government has begun a program
to forcibly move three-quarters of the country's poulation into
Government-controlled villages, and last February peasants who resisted the
Government's notorious resettlement program were massacred by the Ethiopian
army. Even so, the World Bank has continued providing a huge amount of aid -
including over $100 million in l988 - to the Ethiopian Government.

During the l980's, the fastest growing part of the bank's portfolio has been
loans to communist governments. Mr. Conable told Congress, ''The World Bank has
been instrumental in encouraging communist governments to decentralize and
liberalize their economies and introduce economic market incentives.'' But in
November l986, an internal review by the World Bank's North African, Middle
Eastern, and European section examined World Bank loans to Hungary, Romania and
Yugoslavia and concluded: ''The major problem has been the unwillingness of
these countries to allow bank involvement in policy issues. Projects have been
prepared to meet Five-Year Plan objectives which could not be questioned or
analyzed by the bank.'' World Bank money has therefore gone to finance the usual
priorities of the communist governments.

The World Bank is priding itself on its structural adjustment program that
allegedly exists to finance market-oriented reforms by recipients. But an August
l988 confidential World Bank analysis of the effects of structural adjustment
The New York Times, July 30, 1989

lending showed that African countries that received adjustment loans are now
doing significantly worse economically than African countries that had not
received such loans. Worldwide, among governments that received structural
adjustment loans, comparing the period before and after receiving the loans, the
World Bank study found that average external debt-export ratios increased from
272 percent to 392 percent, inflation increased in the majority of countries,
and the average ratio of government expenditures to gross domestic product
increased sharply, from 27.0 percent to 30.5 percent. The rise in government
spending was predictable, since structural adjustment loans have been used to
increase tax collection, raise civil service salaries and bail out floundering
state-owned companies. These efforts epitomize the World Bank's concept of
''free market.''

Mr. CONABLE declared in l987, ''Our common goal should be to restore the
major debtor countries to full creditworthiness within five to seven years.'' At
times, he talks as if creditworthiness were a mysterious vapor that the bank can
create simply by dispersing more billions to needy governments. Many Latin
American countries are not creditworthy largely because they are not
trustworthy. Much of their problem is that their own citizens, if they can save
a few dollars, send it out of the country as soon as possible before a
politician steals it.
The New York Times, July 30, 1989

The World Bank's ''have money, must lend'' syndrome will continue to be a
curse to the world's oppressed citizens and a threat to financial stability. Mr.
Conable should retire as soon as possible.